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Don’t Overstep Your Limits

How long have you been trading? How long have you been trading binary options? If you are new to either of these things, or both, then you need to be honest with yourself. You’re probably not going to be ready to trade at the same level as people who have been doing this for many years.

This means a couple of things for you as a trader. One, it means that you shouldn’t be taking on the same level of risk that those with more experience take on. If they are opening up account with $10,000 and making trades at $100 each, it should be of no concern to you. Even if you have the money to spare, this is not going to be beneficial to you. You can open up an account with that amount if you’d like, but you should be trading with as little as possible to begin with. In fact, if your broker offers a demo account, you should use this at first. This will help you to learn how to trade with zero risk. And then in a few days when you are ready to kick it up a bit, you can start slowly increasing the amount that you’re risking. It might not be as exciting this way, but you will earn more over the long haul as a result.

There’s a general rule that you should never risk more than 1 to 2 percent of your account size. With a $10,000 account, risking $100 or even $200 is completely acceptable. With an account of $1,000, it’s not. You should be adjusting your risk amount per trade based upon how your account shrinks and grows. In other words, the more you trade and the more experience you gain, the more successful you will become. And as your account grows, you can adjust your trades accordingly in order to keep your profit rate growing at an acceptable rate. Most people will not be happy making a few bucks here and there when they have $50,000 in their trading account, and they shouldn’t be. As you become more successful, you need to change how you trade to ensure that your profits and your time are still worthwhile. In the world of investing, this is referred to as compound interest. The more you have, the more you can keep making.

It also means that you should not try some of the same trading techniques that top traders use. Experienced binary options traders know when it is a good idea to use a 60 second option, or when to use a high yield boundary trade. They also know when they should cut losses by ending trades early and how to use complex things like hedging. A beginner cannot know the nuances of these things yet, and they shouldn’t be expected to. Start out using simple tools like the basic call and put options, and as you gain mastery, you will know when it is time to move toward other binary tools. No one can ever master every single binary tool there is, but you can excel in a few, and then use these tools to help you become more profitable than ever.

This method of staying within the bounds of your knowledge and your account size makes it so that you never are taking on too much risk. If you had $100 in your account, and risked $50 on a single trade, you are cut in half if you lose. And when you are dealing with something like binary options, this can easily happen—even to the very best. Appropriate trades ensure that you never lose too much at once, and let you build your skills at the same time.